Bristol Shares Sag On Cancer Drug Worries

Matthew Herper
,
Forbes Staff
I cover science and medicine, and believe this is biology's century.

Shares of Bristol-Myers Squibb have dropped 5.5% to $47 this week as doubts about key studies of its drug nivolumab, which harnesses the immune system as a weapon against cancer, have spooked investors. The slide in the company's shares follows new data presented at the American Society of Clinical Oncology's annual meeting this past weekend. Bristol shares are down by more than 10% for the year.

Bristol has gained a reputation as a Big Pharma company that trains like a smaller, more nimble biotech, after it slimmed itself down and had big successes in oncology, particularly the first immune-system-stimulating drug, Yervoy for melanoma. Nivolumab is a second drug, very effective and less toxic, that could work by blocking the receptors that cancer cells use to cloak themselves from the immune system, allowing white blood cells to destroy them.

Nivolumab has shown promise in melanoma, but non-small cell lung cancer could be its biggest potential market. The first of two clinical trials of the drug versus the chemotherapy Taxotere in patients who have failed one prior treatment is expected to read out in the fourth quarter. In survey of investors conducted last Monday by Mark Schoenebaum at ISI Group, 90% of fund managers predicted the study would succeed.

But Schoenebaum wrote on Wednesday that investors were starting to fret that the odds of success might not be quite that high, even though success is likely. In other words, the stock will go up only a little if the trial succeeds, but if it fails, it will drop, and failure's not impossible.

One big worry, Schoenebaum wrote, is that all the lung cancer patients reported at ASCO to have had their tumors shrink when they were given nivolumab tested positive for a protein called PD-L1. But Bristol's trials include both patients who are positive for PD-L1 and those who are negative for the protein.

Schoenebaum said that he was still about 70% confident that the studies will be a success. He points out that in a phase 1 trial of patients who had been failed by at least three other treatments, nivolumab produced two-year survival rates of 45%; in significantly healthier patients in Eli Lilly's recent study of its drug, ramucirumab, 17% of patients on Taxotere were still alive at the end of two years.

Other sell-side analysts have rushed to Bristol's defense. Christopher Schott at J.P. Morgan repeated Schoenebaum's argument using the Lilly data, and added that in trials some patients who are PD-L1 negative do respond.

Vamil Divan at Credit Suisse argued that investors are missing several key facts about the study that bode well for Bristol. The patients could be on drug as long as 17 months; when nivolumab works, the tumor shrinkage seems to last, so treating patients longer should result in a bigger survival advantage; survival will be measured not by the median time patients are alive, but by their odds of dying, which again plays of nivolumab's strength of durable responses; and, according to Vamil, 40% of patients in the trial might be positive for PD-L1, compared to the 25% investors are telling them they expect.

Seamus Fernandez at Leerink estimates that at current prices, the stock reflects 60% to 70% odds that the lung cancer study will succeed. He, too, thinks the odds are better for the trial, called CHECKMATE 017. “Our confidence in the outcome of 017 stems from correlations with response and smoking status seen in other studies and the fact that nearly all squamous [non-small cell lung cancer] patients are smokers.”

Then again, the argument that the stock is now a buy because it's fallen as much as it has is not likely to get investors terribly excited. Immunotherapy is the most exciting thing in oncology, but Bristol's decline perhaps reflects fears that maybe those high hopes are getting ahead of themselves.